Someone right now is betting on whether a specific senator will say a specific word in a specific speech.
Someone else is betting on the next Fed rate decision. Another person on whether Bitcoin closes above $100k on a Tuesday.
This is prediction markets. Everything is tradeable if enough people care about the outcome.
The Classics: Politics
Elections are the original prediction market use case. High-interest, high-information, binary outcomes. Either she wins or she doesn't.
Election markets have a strong track record. They called the 2020 U.S. election better than most polls. They called Brexit better than almost everyone. When the crowd puts money on it, they tend to get serious.
"Polls measure opinions. Markets measure conviction."
— The distinction that matters
The Action: Crypto and Finance
Will ETH hit $10k? Will this company beat earnings? Will the Fed cut rates this quarter?
These markets attract traders who already live in numbers. The overlap between crypto-native people and prediction market traders is basically a Venn diagram that's almost a circle.
The Fun Stuff: Sports and Entertainment
Will this team make the playoffs? Will this movie win the Oscar? Will that celebrity couple survive the press tour?
These markets don't move the global economy. They just make watching things infinitely more interesting.
Turns out having a financial stake in whether a TV show gets renewed is a deeply efficient way to care about TV shows.
Prediction markets: turning passive consumption into active participation since forever.
The Weird Stuff
We won't name names. But people have created markets on things ranging from geopolitical obscurities to which podcast host would go viral for the wrong reasons.
The weirder the market, the thinner the liquidity — but sometimes the better the edge. If only three people have informed opinions on something and two of them are wrong, the third one is about to make money.
The Principle Under It All
Every prediction market asks the same question: what does the collective knowledge of the crowd say the probability is?
That's useful information. Information the markets create. And you can participate in creating it while getting paid if you're right.
Not bad for betting on weird stuff on your phone.